FiCEP Fundamentals 3 — Questions and Answers
Question 1: Which credit score range is generally considered 'good' by FICO scoring models?
- 580–669
- 670–739 (Correct answer)
- 740–799
- 800–850
Correct answer: 670–739
FICO scores between 670 and 739 are classified as 'good,' enabling access to competitive loan products.
Question 2: A client has multiple high-interest credit card balances. Which debt repayment strategy saves the most money in interest?
- Snowball method
- Avalanche method (Correct answer)
- Consolidation deferment
- Minimum payment cycling
Correct answer: Avalanche method
The avalanche method targets the highest-interest debt first, minimizing total interest paid over time.
Question 3: What is the statute of limitations on debt primarily used for in financial counseling?
- It determines when a debt is forgiven by the IRS
- It sets the time period a creditor can sue to collect a debt (Correct answer)
- It limits how long a debt can appear on a credit report
- It defines when a bankruptcy discharge takes effect
Correct answer: It sets the time period a creditor can sue to collect a debt
The statute of limitations is the legal window during which a creditor can file a lawsuit to collect a debt.
Question 4: Under the Fair Debt Collection Practices Act (FDCPA), which action is prohibited for third-party debt collectors?
- Sending written validation notices
- Reporting debts to credit bureaus
- Calling a debtor before 8 a.m. or after 9 p.m. (Correct answer)
- Identifying themselves as debt collectors
Correct answer: Calling a debtor before 8 a.m. or after 9 p.m.
The FDCPA prohibits collectors from contacting consumers outside the hours of 8 a.m. to 9 p.m. local time.
Question 5: Which of the following is an example of an asset on a personal balance sheet?
- Auto loan balance
- Credit card debt
- Home equity line of credit
- Retirement account balance (Correct answer)
Correct answer: Retirement account balance
A retirement account balance represents something of value owned by the client and is classified as an asset.
Question 6: What does 'net worth' measure in personal financial planning?
- Monthly cash flow after all expenses
- Total annual income minus taxes paid
- Total assets minus total liabilities (Correct answer)
- Investment portfolio value at market price
Correct answer: Total assets minus total liabilities
Net worth equals total assets minus total liabilities and represents the overall financial position of an individual.
Question 7: Which behavior is most closely associated with financial self-efficacy in a counseling context?
- Avoiding financial decisions to prevent mistakes
- Believing one can successfully manage financial challenges (Correct answer)
- Delegating all financial choices to a professional
- Prioritizing short-term gratification over long-term goals
Correct answer: Believing one can successfully manage financial challenges
Financial self-efficacy is the belief in one's own ability to manage money effectively and achieve financial goals.
FiCEP Fundamentals 3
Which credit score range is generally considered 'good' by FICO scoring models?